Six Trends Shaping US Online Retail

Scott Silverman

Executive Director, Shop.org

6 Key Trends in US Online Retail

1. US online retail growth in the context of overall retail and Amazon

2. Review of Q309 and ’09 Holiday Expectations3. Cross-channel4. Social media is (finally) a real channel5. Private flash sales6. Policy issues brewing

Online Retail is Big and Still Growing

#1 Online vs. Store vs. Amazon

Source: Forrester Research

Online Vs. Stores in Q2 2009

#1 Online vs. Store vs. Amazon

Source: Internet Retailer, company press releases

Company Q2 Web Sales Growth

Q2 Comp Store Growth

Diff

Foot Locker Inc. 10.7% -2.9% 13.6%Nordstrom Inc. 0.0% -6.5% 6.5%American Eagle 17.0% -10.0% 27.0%Gap 17.3% -8.0% 25.3%Kohl's 33.3% -23.0% 56.3%Abercrombie 13.0% -30.0% 43.0%

Amazon Vs. Everyone Else

Amazon• US/Canada sales up

19% for first 3 quarters of ’09

• Guidance for Q409 is sales growth between 21% and 36%

Everyone Else• Q2 E-commerce

sales decreased 4.4% (U.S. Dept of Commerce)

#1 Online vs. Store vs. Amazon

Almost Three-Quarters of Retailers’ Sales Grew in Q3 2009

Source: Shop.org / Forrester Research Survey, Oct 2009

#2 Q3 & Holiday Expectations

18%

7%

3%

17%

55%

0% 10% 20% 30% 40% 50% 60%

Decreased more than10%

Decreased 0-10%

Remained flat

Increased 0-10%

Increased more than10% Increased:

72%

Flat: 3%

Decreased: 25%

N=69

Big Retailers Were the Q3 Winners

39%

6%

50%

17%

4%

79%

21%

0%

79%

0% 20% 40% 60% 80% 100%

Decreasedsales

Flat sales

Increasedsales

Large retailer

Medium retailer

Small retailer

Shop.org/Forrester Q3 Flash survey, 10/09Large retailers earn $100MM+ in web revenue (N=24)Medium retailers earn $10-100MM in web revenue (N=24)Small retailers earn <$10MM in web revenue (N=18)

#2 Q3 & Holiday Expectations

U.S. Retailers Optimistic About Holiday ‘09

1/3 Expecting Growth of 25% or More

20.3%

15.3%

16.9%

33.9%

8.5%

5.1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Decrease

Flat to 14% higher

15-24% higher

25-49% higher

50 to 149% higher

150% or higher

#2 Q3 & Holiday Expectations

N = 59, Source, Shop.org eHoliday, 9/09

Oct 10, 2001!!

Cross-Channel Strategies Remain in the Early Stages

#3 Cross Channel

Q: What weighs 135g and can break down some of the strongest silos in business?

#3 Cross Channel

A: U.S. is a Leader in Mobile Internet Usage• More text messages are now sent per

user in the U.S. than in Europe• As of May 2008, there were 40 million

active users of the Mobile Internet in the U.S. (Nielsen)

• Apple sold 6.9 million iPhones in Q4 of 2008

#3 Cross Channel

In-store Product Reviews Now Available

#3 Cross Channel

Social Media Has Overtaken Porn

as the #1 Activity on the Web

Social Media Blooming for Retailers

• 71% of retailers are using Twitter– New to 40% in

2009• 81% of retailers

have a Facebook page– New to 25% in

2009

#4 Social Media

Source: Shop.org 2009 eHoliday study

Private Online Flash Sales

• Daily “members only” sales of limited merchandise• Perfect storm of e-commerce

– Simplicity – one product– Discount– Urgency– Instant communications

• 1.5 million Gilt Groupe members

#5 Private flash sales

• Privacy advocates have the ear of the Obama administration and Congress

• ICANN pursuing unlimited domain names

– .walmart, .tesco, .retail, .beer, etc.

– Significant fraud and cybersquatting threats

Online Privacy Laws & gTLDs

#6 Policy Issues